Q. Other than the normal checking and saving account, where can I put my emergency fund so I can keep it liquid and still earn good interest income?
A. Every family should set aside some rainy day fund to cover 3-6 months expenses in case anything happens. For such emergency fund, liquidity and safety are top concerns.
The following 5 places are good choices if you are not happy with your bank's checking and saving accounts' interest rates.
1. Online Banks
Online banks have lower cost structure therefore they can afford a little bit higher interest rates. Check out Ally Bank or Capital One 360. All online banks offer debit card, so it's easy to use fund in the online bank accounts.
2. Mango Money Card Savings Account
Mango Money Card's savings account has very attractive interest rate - for balance under $5,000, if you set up direct deposit, you can earn 6%, even you don't set up direct deposit, you can still get 2% interest rate.
3. CD accounts
CD accounts tend to have higher interest rates than traditional checking or savings accounts, but the drawbacks are there are typically Terms associated with CD accounts and if you take money earlier, you might incur penalty. However, there are CD accounts with no early withdrawal penalty, look for those product in your banks.
4. Money market funds
This is really an investment account and you could end up losing money (although the chance is very small). It has better rate, but tends to impose high minimum balance requirements.
5. Pay down HELOC
If you still own your bank home equity line of credit (HELOC), it's a good idea to use the emergency fund to pay it down, because HELOC typically has higher rates than any interest rates you can get from any savings accounts. You can pay it down (but keep the account open). If you need rainy day funds, just write a check from your HELOC account.
A. Every family should set aside some rainy day fund to cover 3-6 months expenses in case anything happens. For such emergency fund, liquidity and safety are top concerns.
The following 5 places are good choices if you are not happy with your bank's checking and saving accounts' interest rates.
1. Online Banks
Online banks have lower cost structure therefore they can afford a little bit higher interest rates. Check out Ally Bank or Capital One 360. All online banks offer debit card, so it's easy to use fund in the online bank accounts.
2. Mango Money Card Savings Account
Mango Money Card's savings account has very attractive interest rate - for balance under $5,000, if you set up direct deposit, you can earn 6%, even you don't set up direct deposit, you can still get 2% interest rate.
3. CD accounts
CD accounts tend to have higher interest rates than traditional checking or savings accounts, but the drawbacks are there are typically Terms associated with CD accounts and if you take money earlier, you might incur penalty. However, there are CD accounts with no early withdrawal penalty, look for those product in your banks.
4. Money market funds
This is really an investment account and you could end up losing money (although the chance is very small). It has better rate, but tends to impose high minimum balance requirements.
5. Pay down HELOC
If you still own your bank home equity line of credit (HELOC), it's a good idea to use the emergency fund to pay it down, because HELOC typically has higher rates than any interest rates you can get from any savings accounts. You can pay it down (but keep the account open). If you need rainy day funds, just write a check from your HELOC account.
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